Friday, August 29, 2008

Social Media, the Law, and the Court of Public Opinion

In criminal matters, the answer is the former; but for civil matters--particularly for those of us who live in the world of brand perception and loyalty--the answer may be the latter.

Recently, Hasbro forced a game that was suspiciously similar to Scrabble off of Facebook. Scrabulous, developed by two Calcutta-based brothers, had become a bonafide hit, drawing 500,000 players a day and generating $25,000 per month of ad revenue. There was no question that Scrabulous ripped off Hasbro's Scrabble; the game was "a blatant copy of Scrabble--down to the rules, game pieces and board colors," said Adweek. So it would seem that Hasbro acted appropriately in this clear-cut case, right? Maybe yes, maybe no.

Hasbro had a perfect right to protect its copyright, but one has to wonder if there wasn't a better way. As noted by MediaPost, "it seems obvious that Scrabulous is the best thing to happen to Scrabble in decades," since many of the folks who played the online version "became so enamored of the game that they purchased the physical version."

Peter Fader, co-director of the Wharton Interactive Media Initiative, believes Hasbro's action is an "incredibly bad business decision." He notes that many companies sue "just because they think they have the right to, instead of pursuing what's in their shareholders' best interests." Fader suggests the gaming giant might have formed a partnership with the brothers or bought them out, which would have saved legal fees and yielded a flood of positive publicity. He adds, "Hasbro may have won the battle but it has surely lost the war."

Another risk in Hasbro's approach is that the company could actually lose the case. According to the Washington Post, while many lawyers think the look and feel of Scrabulous was sufficiently alike Scrabble's to justify the infringement suit, others point out that, "The idea of Scrabble -- the idea that you would get points for spelling words -- can't be copyrighted."

Even if you believe (as I do) that the bad publicity and hurt feelings of the 500,000 Scrabulous fans will blow over, this situation makes it apparent that both legal and brand reputation considerations must be weighed before unleashing the lawyers. Another more obvious example of the impact of Social Media on legal matters is the Wal-mart/Debbie Shank case.

Debbie was an employee of Wal-Mart when she suffered a horrible auto accident that left her brain damaged. According to CNN, "Shank and her husband, Jim, were awarded about $1 million in a lawsuit against the trucking company involved in the crash. After legal fees were paid, $417,000 was placed in a trust to pay for Debbie Shank's long-term care."

That's when Wal-Mart exercised the right contained in the health coverage fine print to recoup medical expenses if an employee collects damages in a lawsuit. The $230 billion organization sued the couple for $470,000. One can't help but cringe at Wal-Mart's actions when you read in the CNN article that Debbie Shank is unable to remember that her son was killed in Iraq; she often asks about him and when told her son is dead, Debbie weeps as if hearing the news for the first time.

It will come as no surprise that the reaction across blogs and forums was swift and unforgiving. The fact the company was legally correct was no match against the perceived callousness of the retailer's conduct. I'll leave the moral questions to others, but it is hard to imagine how Wal-Mart failed to foresee the risks; the company is so large, the Shanks so needy, and the sum so small that there was little upside and gargantuan risk in this approach.

In April, Wal-Mart caved into the pressure. In a letter to the Shanks, Executive Vice President Pat Curran said, "Occasionally, others help us step back and look at a situation in a different way. This is one of those times. We have all been moved by Ms. Shank's extraordinary situation."

It is reassuring to know Wal-Mart monitored and responded to the almost unanimous opinions of consumers. Of course, the organization might have saved considerable embarrassment, costs, and lost trust had they considered the Social Media ramifications of their actions in the first place. Brands must become cognizant that the law provides no refuge from public opinion when graceless legal actions are taken. In situations where anger and disappointment go viral, being legally right will not save brands from shame, damaged brand perception, costly PR crisis response, and reduced sales.

The growth of Social Media will increasingly require organizations to consider legal alternatives not just on their merits in law but also based on the potential reaction of millions of interconnected consumers.

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About Experience: The Blog

The world is changing rapidly, both for consumers and brands. Consumers are more empowered than ever before and traditional business models are under attack.

In an increasingly social, mobile and real-time world, brands are created not by the messages they broadcast but by the experiences they offer--ones that create empathy, build trust, earn loyalty, spur Word of Mouth, encourage collaboration, and provide ever greater value to customers in innovative ways. On this blog, we explore how brands are built and business improved via Customer Experience Management, purposeful corporate culture, social and mobile business strategy and collaborative economy models.

You are welcome to participate, criticize, praise, critique, expand, or correct the information and opinions found on this blog. Spam, off-topic, or crude comments will be deleted, but all others are welcome.

About the Author

I am Augie Ray, Research Director covering customer experience at Gartner. I conduct and publish research and advise Fortune 500 clients on the value, process, measurement and tools of customer experience. This includes topics such as Voice of the Customer (VoC), personas, customer journey maps, CX governance, and customer experiences metrics that are leading metrics of brand success.

Previously, I was Director of Global Voice of Customer Strategy for a Fortune 100 financial service company. My background includes more than 20 years of experience in digital, brand, customer experience and social media.

In the past, I led social business at USAA, a firm recognized for its innovative use of communities and social customer care within the financial service industry. I also consulted and published analysis as a Forrester analyst covering digital marketing and social media. In addition, I led a diverse $9 million agency team with specialties in digital development, digital experiential marketing and community strategy.

The future will bring a great deal of innovation that offers opportunities to organizations that are agile and willing to cannibalize their own business models (but it will severely challenge those organizations that cannot.)

The views expressed on this website/blog are mine alone and do not necessarily reflect the views of my employer.